The World Is Changing
This is my first submission but I have enjoyed the many stories and submissions over the past few months I've been reading the site.
A common topic seems to be the ever increasing costs of living in Thailand and the concerns about how much is needed to live and retire in this wonderful country.
Unfortunately for many the world is undergoing a dramatic change and safe havens for investments will in my opinion soon be challenged. The US is deliberately seeking to devalue their currency as there is really no way they can repay the massive amount of debt they have accumulated through stimulus after stimulus. Even after quantitative easing (QE) 2 there is talk about number 3 and 4. Well what does this mean. For the US it could mean an era of monetary inflation and at the same time asset deflation. This effectively means although your assets are going down in value the cost of buying everyday things increases. For those with US citizenship relying on US pensions to survive in Thailand you could find yourself being hit with a currency that is worth nothing compared to the baht and the costs of things in Thailand increasing. If Thailand gets involved in the upcoming currency wars then things will get even more interesting. Inflation could also run rampant in Thailand if governments also decide to devalue their currencies in the race to the bottom.
QE2 if it is followed by QE3 and QE4 will not only mean inflation but potentially hyperinflation. Look at Zimbabwe and see how things turned out there. The world thinks we have escaped the GFC but they have only delayed the inevitable. The US and Europe have outsourced the majority of their service and manufacturing industries over the past 10 to 20 years that turning this back around in time for what is about to occur is too late. We could see trade barriers and the like to try to turn things back but all this will come too late.
As China potentially becomes the next superpower and wealth increases domestically they will be looking to other countries for labour and services which in years to come will no longer be as cheap as they currently are. Reading the paper today I noticed that China has committed to investing $1.6 billion into Cambodia for various infrastructure projects. We have already seen Western companies such as car manufacturers investing heavily in Thailand and as the focus moves to Asia we could see this increasing more and more. With this comes better opportunities for the people as a whole but with it the price of assets increasing and the cost living also increasing as people seek a better life. We also have recent comments in the past few days from the US Secretary of State warning China not to rely too heavily on the US for future growth. China is not ignoring this and is looking towards its neighbours for its continued growth and development. Thailand will naturally be part of these plans.
So how do you prepare for this? Well the key is recognizing that Asia is growing and with it inflation will destroy the savings of many. No longer will you be able to live the rest of your life in Thailand on a nest egg of 500k. Inflation will erode much of what you have and worse you will be in a country where you can't get employment because you left your skills behind years ago and may not understand the language fully. This will have great benefits for the country as many will be lifted out of poverty. Look at China 20 years ago. Agreed many still live in poverty but there is a burgeoning middle class as well. We are already seeing this in places such as Bangkok and over the next 10 to 20 years this will spread out to other parts of Thailand as well.
Gold is a decent thing to consider in inflationary environments but it is not for me to discuss whether this is suitable or not. The key over the next 10 year for those living in Thailand or thinking of retiring there is to protect what they have and make sure they have other interests sufficient to ride out the inflation wave which is fast approaching. In Thailand in particular it will be critical to ensure that investments are sufficient to exceed the rate of inflation and still provide sufficient income to live.
There is no point looking into the eyes of April at Soi 6 and hoping that things will be ok. The signs are there for many to see and for those unprepared it could mean a life change that was totally unexpected or leaving the nation that you have loved for so long.
Chok dee to all at this uncertain time.
The world sure is changing and the whole retirement in Thailand equation is way more complex than many contemplating retirement seem to think. I agree that it would have been fair to think that $500,000 may have been enough to retire to Thailand in the past. You'd probably want twice that today.